BOJ Minds Its Words as Emerging Nations Eye Global Easing Warily

The Bank of Japan is trying to improve its communication with non-Japanese as monetary easing in developed economies fuels concerns about capital flows and as foreigners grab a rising share of the nation’s debt.

The central bank held its first English-language briefings for foreign media in Tokyo on Oct. 22 and 23. Mizuho Securities Co. says policy makers may as early as next week alter the English translation of their agenda to highlighting an inflation “target” rather than a “goal,” emphasizing a commitment to ending deflation.

“More than ever, we see the need for careful explanations of the Bank of Japan’s policies in simple terms for foreigners,” Shuji Kobayakawa, assistant director general at the bank’s monetary affairs department, said in an interview in Tokyo. “It’s becoming difficult to understand the whole picture of monetary policy and its framework with an increasing number of unconventional policies.”

Easing by central banks in major developed economies such as Japan and the U.S. is drawing criticism from emerging nations such as Brazil and Russia about effects on currencies and risks including capital flows that can fuel inflation and asset bubbles. At the same time, increased foreign holdings of Japanese government debt, up 20 percent to 81.6 trillion yen ($1 trillion) in the second quarter, are giving the rest of the world a bigger stake in Japan’s economy.

‘Speak Clearly’

“The BOJ wants to say that it’s conducting appropriate policies as it faces growing concerns among emerging nations about easing,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG and a former BOJ official. “Increased foreign ownership of Japanese debt also gives it a bigger incentive to speak clearly to the world.”

As Japanese exporters struggle with gains in the yen that crimp their sales and profits, any perception that the BOJ is deepening its commitment to defeating deflation could help to weaken the currency. The median forecast in a Bloomberg News survey of analysts is for the yen to end 2012 at 78 per dollar, up 19 percent over three years. It was 79.95 as of 12:14 p.m. in Tokyo today.

As well as the media briefings, the bank has explained its policies to the U.S. and U.K. chambers of commerce and the Indonesian embassy in Tokyo, Kobayakawa said. The BOJ has also tapped Satoshi Kawazoe, the former head of its London office, for an international communications role and in December set up an English Twitter account that has more than 2,000 followers.

More Easing

The BOJ has this year boosted the asset-purchase funds which are its main policy tool amid near-zero interest rates. JPMorgan Chase & Co. and UBS AG expect more stimulus at its next meeting on Oct. 30, where the wording on the inflation goal could be altered according to Mizuho. The bank buys government bonds, exchange-traded funds, real-estate investment trusts and other assets.

Russian Finance Minister Anton Siluanov said at an International Monetary Fund meeting in Tokyo on Oct. 13 that easing in the U.S. and Japan is undermining efforts to control inflation, while BOJ Governor Masaaki Shirakawa said that the bank knows the impact of its policies needs “close monitoring.”

The Bank of Japan is trying to improve its communication with non-Japanese as monetary easing in developed economies fuels concerns about capital flows and as foreigners grab a rising share of the nation’s debt.